Why Incorporate a company in Singapore?
There are many benefits that come with establishing or expanding your business in Singapore. Singapore, well-known for its central location in Southeast Asia, is the starting point for head to other ASEAN countries due to its business-friendly policies and politically stable environment.
Singapore is a highly recommended destination for business incorporation amongst entrepreneurs, corporations, and projects of all sizes for the following reasons:
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Top-ranking Freedom to Trade: Singapore is the nation that is most friendly to trade, offering companies a perfect setting for conducting business internationally;
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Advantageous Corporate Tax Rates: Businesses of all sizes benefit from a competitive environment since corporate tax rates are set at a flat 17% on chargeable income;
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Tax Efficiency: Singapore offers a tax-efficient framework that is advantageous to investors and enterprises due to the absence of capital gains or dividend taxes;
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No Estate, Death, or Inheritance Tax: Singapore does not impose estate, death, or inheritance taxes, which makes it a favourable place for wealth preservation and succession planning compared to many other jurisdictions;
- Progressive Personal Tax Rates: Individuals in Singapore can take advantage of great tax rates according to their income levels, with personal tax rates starting at 0% and peaking at 22% above S$320K.
All things considered, Singapore's commitment to creating a pro-business environment, along with its advantageous location and tax-friendly laws, make it a very popular choice for businesses seeking to succeed in the heart of Asia.
Exploring the Right Company Structure for Your Business
It's important to understand the various business types and their requirements when you start the process of forming a company in Singapore.
Let's review the most popular categories and find what's needed for an effortless integration process.
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Private Limited Company (Pte Ltd):
- Features: A Private Limited Company is the most common and favoured form among businesses. It is well-known for providing its owners with limited liability.
- Ownership: Limited to 50 shareholders, either private persons or businesses.
- Regulatory Requirements: Usually less onerous than those of a Public Limited Company, offering greater flexibility in operations.
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Capital: On the stock exchange, shares are not freely traded.
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Public Limited Company:
- Capital Raising: Public Limited Companies benefit from the ability to raise capital by selling shares on the stock exchange to the general public.
- Regulatory Compliance: Because public monies are involved, there are more regulatory requirements and financial disclosures.
- Share Trading: On the stock exchange, shares are freely traded, giving shareholders access to liquidity.
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Size: Usually appropriate for bigger businesses with significant capital requirements.
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Subsidiary Company:
- The ownership structure of a subsidiary firm is different from that of its parent business even though it is fully owned by it.
- Limited Liability: This feature ensures that the overseas parent business is not impacted by financial obligations of the subsidiary.
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Independence: Offers a strategic expansion option for international enterprises, operating autonomously while following to the rules and regulations of the country of origin.
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Branch Office:
- Extension: A branch office represents a foreign corporation's operations in the host nation by acting as an extension of the company.
- No Separate Legal Entity: The foreign business maintains direct control and liability over a Branch Office, opposite to a subsidiary.
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Activities: Takes part in similar commercial activities to the overseas parent company, enabling a uniform operational strategy.
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Representative Office:
- Limited Activities: A Representative Office is primarily used for feasibility studies, market research, and promotional efforts; as such, its ability to conduct revenue-generating operations is restricted.
- No Legal Entity: Is unable to enter into agreements or carry out profitable operations since it lacks a legal identity apart from the parent company.
- Temporary: Typically set up for a specified duration, after which corporations may contemplate shifting to a more substantial presence like a Branch or Subsidiary.
Small business owners may choose to go with an unincorporated business entity, like a sole proprietorship, as an alternative to an incorporated structure. Let's examine the primary benefits:
- Ownership: Sole Proprietorships are the most basic type of business structure because they are owned and run by a single person.
- Unrestricted Liability: The owner bears unrestricted personal liability for the commitments and debts of the company. Liabilities of the firm must be paid for with personal assets.
- Decision-Making: Provides the owner with complete control over corporate choices and operations.
- Taxation: Owners are subject to individual income tax rates on business income, which is normally classified as personal income.
- Ease of Setup: Compared to incorporated entities, it's relatively easy and affordable to start, with less regulatory obligations.
- Limited Growth: May face limitations in terms of scalability and access to capital compared to incorporated structures.
- Common for Small Businesses: Often chosen by small businesses, freelancers, or consultants due to its simplicity and low administrative burden.
Requirements for Incorporation
After deciding which kind of business best suits your goals, the following step is to make sure the incorporation process goes smoothly by meeting all the necessary requirements.
Let's explore the key requirements that must be met in order for a business to successfully establish itself in Singapore:
Directors
A minimum of one director is required, and they must be a local resident. This includes Singaporean citizens, Permanent Residents, or individuals holding an Employment Pass.
Shareholders
Your company must have at least one shareholder, and it can go up to a maximum of 50 shareholders. Shareholders can be individuals or corporate entities.
Company Secretary
Within six months of incorporation, it's mandatory to appoint a qualified company secretary. The company secretary should be a local resident and plays a crucial role in ensuring compliance with regulatory requirements.
Registered Address
A local Singapore address is required for the registered office of your company. This provides the official location for receiving correspondence and legal notices.
Share Capital
Unlike some jurisdictions, Singapore does not mandate a minimum paid-up capital. You have the flexibility to determine the capital structure based on your business needs.
The capital can be denominated in any currency, although using SGD (Singapore Dollar) is common.
Company Name
Your chosen company name must be approved by ACRA (Accounting and Corporate Regulatory Authority).
It should be unique and not infringe on existing trademarks to ensure a distinct identity for your business.
Conclusion
Understanding and fulfilling these requirements is crucial for a smooth and legally compliant company incorporation process in Singapore.
If you require further assistance or information on establishing your business in Singapore, feel free to contact us. We are here to guide you through every step of the way.